On the day that the value of Sterling fell to its lowest level for 13 years, the Bank of England’s Monetary Policy Committee (MPC) meets to decide what to do about interest rates. The MPC is charged by the government with setting apt interest rates to maintain the economy in good shape, and above all to keep inflation within the government’s target, which is presently 2%.
The expectations are that the MPC will cut interest rates by a full percentage point, and it might even repeat last month’s very powerful and unprecedented reduction of one and a half percentage points. But, the chances of this are somewhat tempered by the already shaky state of Sterling on the world currency markets. It’s presently at its lowest level since 1996, having lost some 27% against the US Dollar in the last twelve months. That’s a dreadfully bleak picture especially if you bear in mind that the US Dollar is itself very weak right now. That said, part of the reason that Sterling is so low is because many analysts and traders have already accounted for in the expected one percentage point cut. So, having suffered most of the consequences in advance, the MPC may as well take the plunge and try to revitalise the economy with a daring move.
If the Bank’s MPC decide to make a full one percentage point reduction in rates, it will see them at their lowest level since 1951, and if it acts on the advice of many pundits, it might well go so far as a one point five percentage point reduction, which would take rates to their lowest ever level in the Bank of England’s three hundred and four year existence.
Of course interest rates are of vital importance to Home Buyers, but in these unparalleled and uncertain times, what will it mean if I want to Sell My House? Will there suddenly be a queue of people ready to Buy My Home? Well, for sure a fall in interest rates will help those Home Buyers who have already done the deal, and now just have to pay off the mortgage in order to become real House Owners.
If you are in the “Sell My House” mode, an interest rate cut should help to stimulate the economy in general, and make loans cheaper for everybody including Home Buyers. If the forecast interest rate reduction causes a further fall in the value of Sterling, it may also bring in Home Buyers from other countries, who’ll be very happy to snap up UK properties at historically low prices, especially when the pound is also so low.
